The Potential Benefits of Hilmer and Related Reforms: Electricity Supply
AbstractThis article examines the macroeconomic impact of the elimination of x-inefficiency in the Australian electricity supply industry using a computable general equilibrium (CGE) model of the Australian economy. Data envelopment analysis and a stochastic production frontier model are applied to measure x-inefficiency in the electricity industry. It is assumed that microeconomic reform will eliminate this x-inefficiency. The potential increase in total factor productivity resulting from microeconomic reform is introduced into the CGE model as a Hicksian-neutral factor-augmenting technological change. Two alternative labour market assumptions are utilised in measuring the macroeconomic benefits of the microeconomic reform. The results suggest that even under the most pessimistic labour market assumptions, the potential benefits of microeconomic reform in an industry such as electricity will not be trivial. It therefore follows that the impact of microeconomic reform on economic growth could be substantial, particularly if the Australian labour market is more flexible than hitherto assumed.
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Bibliographic InfoPaper provided by Victoria University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number g-128.
Date of creation: Apr 1998
Date of revision:
microeconomic reform; x-inefficiency; data envelopment analysis; stochastic production frontier; computable general equilibrium; natural rate of unemployment;
Find related papers by JEL classification:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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